Why does the title of this Post contain the word "Bonus"? This is the eighth edition of the North Carolina Business Court Last Month Newsletter, and it also marks the first time I’m asking subscribers to start paying for it.

Why pay? Because I believe this newsletter provides real value. Thousands of people receive it, and hundreds open every edition I send.

Who should read it? It’s not just for lawyers litigating in the Business Court. It’s for every lawyer who ever practices in the North Carolina Superior Courts and the North Carolina appellate courts, but particularly in the Business Court.

Producing the Newsletter requires a significant investment of time. Over the last few Newsletters, I wrote about 16 Business Court Opinions totaling 457 pages. Consider how long it would have taken to read and digest all of that material yourselves.

There are also meaningful costs to me involved in producing the Newsletter. This year, I expect to spend about $1,000 on the Beehiiv platform that hosts and distributes it. I also retain Lucas Addison, a Beehiiv expert, on a monthly basis. Lucas has been instrumental in improving the newsletter’s design and giving it life, and I could not have built it without his support.

Beyond that, there are additional out-of-pocket expenses. I regularly purchase printer paper and ink because I prefer reviewing court opinions on paper rather than on a screen. And because I can no longer type as easily as I once could (I used to do about 120WPM pretty accurately, I'm now down to about 20 WPM inaccurately. Why? I don't want to talk about it). I’ve also had to invest in a pretty expensive dictation software to continue producing the Newsletter efficiently.

If you’ve followed the Newsletter over the past few months, you may remember that I originally planned to publish only once a month, covering the previous month’s Opinions and its Orders of Significance. Over time, however, the publication expanded into three Newsletters per month: Opinions Part 1, Opinions Part 2, and a separate Orders of Significance edition. I am thinking that the Opinions Newsletter may have to turn into three parts eventually. (The next Newsletter actually will be the first Part 3. There was too much to write about this month to fit into two Opinions Newsletters). I’ve spent considerable time thinking about what a fair subscription price should be. For now, I’ve decided that the first newsletter each month — Opinions Part 1 — will remain free for all subscribers. Access to Opinions Part 2 (and the possibly regular Part 3 and the Orders of Significance newsletter will cost $5 per month. Total, not per Newsletter.

Why $5? First, I wanted the price to feel modest and affordable while still reflecting the value of the work involved. Second, it’s roughly what I spend each day on an iced coffee at Starbucks ($4.54). Again, Opinions Part 1 will remain free. In addition, not everyone will have to pay. Some subscribers will receive full access at no charge. That group includes anyone with an email address ending in nccourts.org, including the judges and staff of the Business Court. At present, three Business Court judges subscribe to the newsletter (thank you Judges). Free subscriptions will also continue for close lawyer friends, family members, possibly some of my former law partners, retired Superior Court Judges (I have subscribed one to my email list myself), and anyone who emails me at [email protected] with a reasonable request for why they deserve complimentary access.

This Month's Opinions Part 2 has some good stuff. If you are considering bringing a lawsuit on behalf of a minority shareholder asserting a claim for breach of fiduciary duty against his or her fellow shareholders, Chalk v. Chalk, 2026 NCBC 31 (Earp, J.) should be required reading. A fan of sanctions cases? KJET Ventures, LLC v. Jamison, 2026 NCBC 32 (Houston, J.) is one for you. Appealing a decision from the Business Court? Be sure to direct your Notice of Appeal correctly (to the North Carolina Supreme Court, not the North Carolina Court of Appeals), and be sure to file that Notice in the county from which the case originated, not only on the Business Court's electronic filing site. If you don't, you'll be likely to have your entire appeal dismissed. That's Law Off. of Ashley-Nicole Russell, P.A. v. McLawhorn Legal Servs. PLLC, 2026 NCBC 44 (Robinson, J.). Remember that you won't get any more of this good stuff if you don't start paying a whopping five dollars a month for a subscription. Please do that.I also considered offering discounted annual subscriptions (for example, $50 per year), but I have some reservations about committing that far into the future — both in terms of my willingness and ability to continue publishing. For that reason, subscriptions will remain only month-to-month, and you’ll be able to unsubscribe at any time. The mechanics of subscribing will be posted soon.

You might be thinking why should I pay for something like this? Can't I get this stuff for free from the existing blogs and others writing about the NC Business Court? Well, you can, but as I looked recently at the existing production from those blogs, there is one that has not posted in nearly a year, and another that does not seem dedicated at all to a regular production. And of course you can read the decisions of the Court yourself, but just think how much time that would take you. While lauding myself, I have to give credit to the Business Court Blast (https://rcdlaw.net/news/). They deliver lightning quick summaries of the Court’s decisions for which they do not charge. As I am writing this, they are already posting about the Court's Opinions of May 2026. I can’t compete with that, but what I can promise is that I think that my writing is much more readable than theirs. They write in a “West key number system style”. (You know what I mean) I don’t. You can decide for yourself whose writing you would rather read. And there's always Lawyers Weekly to think about, but that is almost $300 a year.

This Newsletter, with its much narrower focus than Lawyers Weekly, is a DEAL. I am reluctant to commit to a schedule that I might not be able to keep, but I’m thinking of the following release dates:Newsletter1 (Opinions): the 20th of the month after the Opinions were handed down. Newsletter 2 (Opinions): the day after the last day of the month after the Opinions were handed down.Newsletter 3(Orders): 10 days following Newsletter 2.Don’t think that you’re alone in reading this Newsletter. Each Newsletter has gone out to thousands of free subscribers since February of this year (mostly taken from the email list of my former blog) Hundreds of you have faithfully opened each Newsletter. Please start paying a nominal fee for what I believe is a very valuable service.Thank you,Mack Sperling

Law Off. of Ashley-Nicole Russell, P.A. v. McLawhorn Legal Servs. PLLC, 2026 NCBC 44 (Robinson, J.) illustrates the kind of mistakes that can be made when appealing a decision from the North Carolina Business Court. Judge Robinson had entered an Opinion dismissing all of Plaintiff's claims in this action on January 21, 2026.

Rule 3(c) of the North Carolina Rules of Appellate Procedure called for the Notice of Appeal to be filed and served within thirty days after entry of judgment. Plaintiff, now the Appellant, filed her Notice of Appeal electronically with the Business Court on February 6, 2026. Well within the 30 day period specified by NCRAP 3(c). Timely, right?

No, because the Notice of Appeal was not filed with the Wake County Clerk of Superior Court. Business Court Rule 3.11 says that “the Clerk of Superior Court in the county of venue maintains the official file for any action designated to the [Business] Court[.]” The Notice of Appeal should have been filed with the Wake County Clerk of Superior Court.

But that was not the only mistake in this Notice of Appeal. That document stated that the appeal was to the North Carolina Court of Appeals. That was the wrong Court. It should have been directed to the North Carolina Supreme Court. Section 7A-27 of the General Statutes says that:

Appeal lies of right directly to the Supreme Court in any of the following cases: (1) All cases in which the defendant is convicted of murder in the first degree and the judgment of the superior court includes a sentence of death. (2) From any final judgment in a case designated as a mandatory complex business case pursuant to G.S. 7A‐45.4 or designated as a discretionary complex business case pursuant to Rule 2.1 of the General Rules of Practice for the Superior and District Courts.

N.C. Gen. Stat. §7A-27(a)(2).

That misdesignation of the proper appellate court violated Rule 3(d) of the North Carolina Rules of Appellate Procedure, which says that “[T]he notice of appeal required to be filed and served by subsection (a) of this rule shall specify the party or parties taking the appeal; shall designate the judgment or order from which appeal is taken and the court to which appeal is taken.”

Those of you who don't practice in the appellate courts may think this is no big deal, and that Judge Robinson could have given the appellant a pass on this inconsequential error. But he felt that he did not have the flexibility to do that. He stated that “the trial court must strictly construe Appellate Rule 3 and is not vested with the discretion to allow an appeal to proceed notwithstanding a notice of appeal’s noncompliance with that rule.” Op. ¶13.

If you are a person who can rattle off the Rules of Appellate Procedure by heart, you might say what about NCRAP 2? That Rule appears to provide some latitude to a Court cto vary the Rules. It says:

2. Suspension of Rules. To prevent manifest injustice to a party, or to expedite decision in the public interest, either court of the appellate division may, except as otherwise expressly provided by these rules, suspend or vary the requirements or provisions of any of these rules in a case pending before it upon application of a party or upon its own initiative, and may order proceedings in accordance with its directions.

So that largesse is apparently limited to the appellate judges. That Rule begs the question, why was Judge Robinson of the trial court deciding the validity of the Plaintiff/Appellant's Notice of Appeal rather than one of the appellate courts? The answer to that question is in Appellate Rule 25(a), which provides that “prior to the filing of an appeal in an appellate court, motion to dismiss are made to the court. . . from which appeal has been taken; after an appeal has been filed in an appellate court, motion to dismiss are made to that court.” Well, hadn't this appeal been "filed” with the appellate court when the Notice of Appeal was filed? No, an appeal isn’t fully before an appellate court until the appeal has been "docketed." Craver v. Craver, 298 N.C. 231, 258 S.E.2d 357 (1979)("until a record on appeal is filed and docketed, there is nothing pending before the appellate division."). And the Notice of Appeal was filed with the Business Court anyway, not the appellate court.

A proposed Record on Appeal had been prepared by the Plaintiff/Appellant, but it had not been filed with the appellate court. Thus, the determination of the validity of the appeal rested with Judge Robinson. Judge Robinson dismissed the notice of appeal.

He also agreed to consider the Defendant’s application for attorneys’ fees. He gave the defendant 28 days to “file a separate motion, along with a supporting brief and affidavits, justifying their request for an award of attorneys’ fees, including a disclosure of the time spent and costs incurred, and evidence of the reasonableness of the fees requested.” Op. ¶15. Ouch, salt in the wound.

As I was writing about this Opinion, I had the distinct feeling that I had been down this exact road before. I had. Don’t file a Notice of Appeal from a Business Court decision to the wrong appellate court. It will be dismissed. It has happened at least twice.

If you are considering bring a lawsuit on behalf a minority shareholder asserting a claim for breach of fiduciary duty against his or her fellow minority shareholders, Chalk v. Chalk, 2026 NCBC 31 (Earp, J.) should be required reading.

But before getting to Judge Earp's admirable discussion of that complicated issue, there is much to wade through.

The first 16 pages of Chalk squared (Chalk v. Chalk) present as a case about a convoluted Shareholders Agreement between two families which formed a business engaged in insurance and real estate over 100 years ago.

The heart of the dispute concerns claims by William B. Chalk, Jr. (known as “Buff”). Buff was a 25% shareholder of Chalk & Gibbs. The remaining shares were held in equal percentages by two other Chalks and one Gibbs.

Both had gotten crosswise with his fellow shareholders over claims against another employee (the “Lead Producer”) alleging sexual harassment and management decisions made by Buff over which they disagreed.

The Defendant minority shareholders, exercising their rights under the Shareholder Agreement, informed Buff that he was subject to mandatory retirement because he had reached the age of 75 and that they would be repurchasing his shares of the company at a formula specified in the Agreement. The Defendant minority shareholders also blocked Buff’s attempt to transfer his shares to his son.

Employment Discrimination Claims

Buff claimed that he had been terminated in violation of the Age Discrimination in Employment Act and retaliated against in violation of Title VII of the Civil Rights Act of 1964. He also threw in a claim under state law, for wrongful discharge in violation of public policy pursuant to Section 143-422.2 of the North Carolina General Statutes.

These claims depended upon Buff being regarded as an employee of Chalk & Gibbs. Both federal statutes apply only if the plaintiff is an employee. They do not provide much of a definition of what an “employee” is. Under both statutes, “employee” is defined merely as “an individual employed by an employer[.]” 29 U.S.C. § 630(f); 42 U.S.C. § 2000e(f). Op. ¶58.

Given that lack of a definition, the United States Supreme Court has held that “courts must analyze an individual’s employment status by reference to ‘the conventional master-servant relationship as understood by common-law agency doctrine.’” Op. ¶61 (quoting Clackamas Gastroenterology Associates, P.C. v. Wells, 538 U.S. 440, 445 (2003).

Undertaking that analysis, Judge Earp ruled that Buff was not an employee of Chalk & Gibbs entitled to the protection of the federal laws. She reasoned that:

In short, “he was as fully integrated into [Chalk & Gibb]’s management structure as anyone could possibly be.” Op. ¶65. He was not entitled to the protection of the federal laws "given the amount of control he had over the business.” Op. ¶68.

Judge Earp noted some countervailing factors — the Employment Agreement referred to principals in the company like Buff as “employees”; and he received a salary in the form of W-2 wages. She said that "these facts alone do not transform Buff into an employee under the anti-discrimination laws.” Op. ¶66. That Chalk & Gibbs was a closely held corporation did not make a difference either. Op. ¶67

Plaintiffs’ Motion for Summary Judgment on Defendant Buff’s employment discrimination counterclaims was granted. Op. ¶69.

Fiduciary Duty Claim Also Bites the Dust

Buff also claimed that “as a minority shareholder, the remaining three shareholders, who collectively held a majority interest (of 75%), owed him fiduciary duties.” Op. ¶70. The claimed violation of those duties, Buff said, were (1) attempting to force him to sell his stock at a significantly lower value; (2) forcing the sale of his stock earlier than the timeframe set out in the Shareholders’ Agreement; (3) refusing to allow him to transfer 5% of Buff’s stock to Bill, his son; (4) blocking Buff’s children from becoming shareholders; (5) diverting dividends from Buff by increasing their own salaries; (6) acting in bad faith by failing to pay him dividends; and (7) refusing to produce financial records.

Judge Earp took the opportunity in her Opinion to wade into the unanswered question in North Carolina of “[t]he circumstances under which multiple minority shareholders combine into majority or controlling shareholders for the purposes of” creating a fiduciary duty to another individual minority shareholder.

These are choppy waters. “Shareholders in a corporation generally do not owe a fiduciary duty to one another.” Op. ¶73. Judge Earp observed that “allowing a minority shareholder to sue for breach of fiduciary duty each time he or she was outvoted would ‘negat[e] any and every corporate action taken by a majority.’” Op. ¶73 (quoting Duffy v. Schussler, 287 N.C. App. 46, 64 (2022)). 74.

The North Carolina Supreme Court ducked the question in Corwin v. Brit. Am. Tobacco PLC, 371 N.C. 605, 616 (2018), where it “held” that:

this Court has never held that a minority stockholder owes fiduciary duties to other stockholders, but it has also never held that a minority stockholder cannot owe fiduciary duties to other stockholders.

Op. ¶75 (emphasis added). Hmmf. Thank you, NC Supreme Court.

So, in Chalk squared, Judge Earp was confronted with the situation where Plaintiff Chalk was contending that the three other minority shareholders of the company had banded together against him and therefore owed him a fiduciary duty.

This was a tough hill for Plaintiff Chalk to climb. Judge Earp observed that “[i]n general . . . our courts have ‘refused to impose a fiduciary duty on minority members that exercise their voting rights by joining together to outvote a third member.’” Op. ¶76. She said that given this general rule, "the standard for exception should be exacting and its occurrence rare.” Id.

Relying upon a Court of Appeals decision, Duffy v. Schussler, 287 N.C. App. 46, 64 (2022), Judge Earp said that the issue was:

whether the facts show that the majority vote of the minority shareholders in a closely-held corporation is elevated ‘into a situation of “domination and influence” over the outvoted minority shareholder.’

Op. ¶76 (emphasis added).

The Duffy decision points to three factors that might support the creation of such a duty in the right circumstances. Those are:

If you're a fan of sanctions cases, you'll remember Judge Houston's order in KJET Ventures, LLC v. Jamison, 2026 NCBC Order 1 (Houston, J.). In that Order, Judge Houston sanctioned and admonished the Defendants’ attorney (who I will continue to refer to as Attorney X) for his repeated disregard of Business Court Rules.

Attorney X and his clients were back for a round two of sanctions in KJET Ventures, LLC v. Jamison, 2026 NCBC 32. This time, it was the Defendants themselves who impaled themselves on the hook for sanctions while Attorney X squiggled free.

What really seemed to light up Judge Houston in this second go-round on sanctions were two affidavits filed by the Defendants in support of a motion for preliminary injunction. In each affidavit each defendant "expressly and unambiguously affirmed that there ha[d] never been an operating agreement for KJET,” the LLC which is the Plaintiff in the case. Op. ¶8. The motion for an injunction was premised on the nonexistence of an operating agreement.

Those statements were flat out not true. Judge Houston observed that:

the evidence of record reflects that (i) an operating agreement for KJET did exist and was signed; (ii) both Defendants were aware of that operating agreement; (iii) both Defendants signed the agreement, as did other putative members of Plaintiff; (iv) defendant Jamison contributed to the drafting of the agreement; and (v) the operating agreement originated from defendant Jamison’s own email address. (ECF Nos. 27, 27.2, 27.3, and 27.4).

Op. ¶12 (emphasis added).

Those misstatements in those Affidavits alone might have yielded the severe sanctions which Judge Houston imposed, but there was more to the Defendants’ misconduct than that. The Judge had found, following a BCR 10.9 hearing, that the Defendants had failed to provide full and complete responses to discovery requests from Plaintiff.

He had entered an Rule 10.9 Order requiring that the Defendants supplement their discovery responses and productions by a particular date and time. That deadline was set out in the Order in boldfaced capital letters.

Two months passed without compliance by the Defendants with the Court’s order. At that point, the Defendants requested additional time to comply with the order. Although they were already delinquent on compliance, the Defendants requested an additional 60 days to comply said that they could "seek, retain and bring new counsel up-to-date on this matter.” Op. ¶27. No explanation was given by the Defendants for their delinquency.

The Opinion is replete with caustic criticism of the Defendants’ conduct. For example:

Defendants’ statements in their affidavits were “false— demonstrably so—and Defendants have provided no substantive response concerning that falsity.” Op. ¶76.

The ultimate resolution of the case was that Judge Houston sanctioned Defendants pursuant to rules 11, 37, and 41 of the North Carolina Rules of Civil Procedure, as well as per his inherent authority "to do all things that are reasonably necessary for the proper administration of justice.” Op. ¶¶87,88.

The sanctions? Pretty harsh. The court struck Defendants’ answer, affirmative defenses, counterclaims, and third-party claims, and entered default against Defendants on Plaintiff's affirmative claims. Op. ¶97.

A few Interesting Nuggets on Sanctions

Part of the sanctions were based upon NCRCP 37, which allows for the entry of sanctions for violation of a court order compelling discovery. Where was the court order compelling discovery here? The short answer is that a “10.9 Order is ‘an order to provide or permit discovery’ within the meaning of Rule 37. Op. ¶65.

Why were the Defendants personally liable for the sanctions? As Judge Houston put it: “It is clear both in statute and case law that a represented party may be sanctioned for improper purpose violations under Rule 11 at the discretion of the trial court.”) Op. ¶85.

And why wasn't Attorney X sanctioned along with his clients? Here's what Judge Houston said about that:

As to [A]ttorney [X] individually, time and again throughout this case, his conduct has been egregiously improper and has demonstrated a remarkable disregard for the Court’s Orders and applicable rules, resulting in sanctions against him Those sanctions are matters of public record. While further sanctions against [A]ttorney [X] might be warranted, they would also serve little value in the current context of this action. Accordingly, in the exercise of its discretion, the Court determines that it is neither useful nor productive to further individually sanction [A]ttorney [X] yet again.

Op. ¶98.

This represents almost the end of this sanction-heavy case. There is currently pending before the court a Motion for Entry of Default Judgment by the Plaintiff. That was filed on May 8, 2026.

Cranford v. Hintz, 2026 NCBC 33 (Robinson, J.) is a derivative action filed by a member of Steele Family Farms, LLC (“Steele”), which was formed “to hold family investments, including farms and real estate.” Op. ¶13. The Defendants attacked the manner in which Plaintiff had commenced its derivative action Complaint on every procedural technicality that they could think of, beginning with the adequacy of the Demand that the Plaintiff had made.

Sufficiency of Derivative Action Demand

A demand on the LLC to take suitable action is a prerequisite to filing a derivative action. Plaintiff Cranford holds a 1/3 ownership interest in Steele. Wanting the LLC to take certain action, she made the appropriate demand required by N. C. Gen. Stat. §57D-8-01

Was the Demand Sufficient?

The Demand requested, pursuant to N.C.G.S. § 55-7-41 (the wrong statute):

that the Company investigate, act upon, and resolve the following: 1. Optimizing the use of company property for the benefit of all of its members. Said company shall include both real and personal, and said property shall include but not be limited [sic] the real property upon which Mr. Wesley Steele maintains, feed[s], and raises cattle without paying rent; 2. In addition and/or in the alternative, dissolving the company and distribut[ing]its assets including the real property, in accordance with the respective ownership interests of its Members; 3. Partitioning the company’s real property as necessary to properly dissolve the company and distribute its assets; and, 4. Otherwise addressing the current gridlock that is wholly frustrating the administration of the company in that no one can agree on what the company assets are, how to use company assets, whether there has been self-dealing and/or self-enrichment by Mr. Wesley Steele and to what extent, and how to dissolve the company and distribute its assets. (Dem. Letter 1–2.)

Op. ¶18.

The Steele LLC Defendant moved to dismiss the derivative action on the basis that the Demand had been prefaced with a reference to the corporate statute governing derivative actions (N.C. Gen. Stat. §55-7-41) rather than the statute governing derivative actions involving LLCs (N.C. Gen. Stat. §57D-8-01).

Come on! Judge Robinson batted aside that hypertechnical argument in a single paragraph he said that:

While the incorrect citation is clearly an oversight on Plaintiff’s part, nothing in N.C.G.S. § 57D-8-01 nor in the case law the Court has examined around that statute makes citing the wrong statute grounds for insufficiency and hence dismissal of an otherwise proper derivative claim.

Op. ¶41 (that is exactly the opposite of the unsympathetic approach that Judge Robinson took in dismissing an appeal in Law Off. of Ashley-Nicole Russell, P.A. v. McLawhorn Legal Servs. PLLC, 2026 NCBC 44 (Robinson, J.). (see above)

Continuing with its nit-picky objection to the Demand, the Steele LLC argued that the Demand had not been made “on the LLC,” as the statute requires. The argument was that the Demand had been sent to the other members of the LLC, not to the LLC itself. Op. ¶36. That snippy argument cut no ice with Judge Robinson, who said:

This argument, while begging the question who else Plaintiff could send a demand letter to in a closely-held LLC, ignores the fact that the Demand Letter is addressed to the Company at its registered address and Defendants do not contend it was not received there. The Court thus concludes that the demand was successfully made on the Company.

Op. ¶36.

The Defendants further nit picked about the adequacy of the language of the Demand. It must request the LLC to “take suitable action.” G.S. §57D-8-01(a)(2). In particular, the Defendants focused on the first of the four numbered demands. That one demanded

that the Company investigate, act upon, and resolve the following: 1. Optimizing the use of company property for the benefit of all of its members. Said company shall include both real and personal, and said property shall include but not be limited [sic] the real property upon which Mr. Wesley Steele maintains, feed[s], and raises cattle without paying rent.

Op. ¶18.

The Defendant LLC argued that this demand “essentially amounts to a demand for the Company to ‘do better for your owners,’ and that it did not contain a request for “suitable action.” Op. ¶37. Judge Robinson disagreed, focusing instead on the prefatory language of the demand asking the LLC to "investigate, act upon, and resolve” the issues raised. He said that all of the requests in the demand were "sufficiently clear and particular to allow the Company to assess its rights and options and choose how to act.” Op. ¶39.

The Plaintiffs Were Successful in Being Allowed to go Forward on Some of Their Breach of Fiduciary Duty Claims

The Plaintiffs had attempted to make breach of fiduciary duty claims against the Defendants which they said were owed to them on an individual basis. They also made claims that the defendant had breached their fiduciary duties owed to the LLC as a whole.

On the individual claims, the plaintiffs were unsuccessful Judge Robinson observed that there did not appear to be any allegation that the Defendants exercised control of the company. Section 9.3 of the Operating Agreement specified that “Major Decisions “could not be taken without the unanimous consent of the members of the LLC. He said that “because Defendants do not control the Company, they do not owe Plaintiff individually any fiduciary duties.” Op. ¶49. He dismissed those individual claims.

The claim on the fiduciary duties owed to the LLC survived. Judge Robinson stated that “While managers of an LLC usually do not owe fiduciary duties individually to members of an LLC, managers generally owe fiduciary duties to the company as a whole under N.C.G.S. § 57D-3-21.” Op. ¶51. He rejected the argument by the LLC that the language of the Operating Agreement had eliminated the fiduciary duties that the LLC might have allowed by statute.

That language read as follows:

Section 9.5. Liability of Members. No Member shall be personally liable, responsible or accountable in damages or otherwise to the other Members or to the Company for any acts performed by him within the scope of the authority conferred upon him by this Agreement except for acts of gross negligence or willful misconduct.

Op. ¶52. As Judge Robinson saw that language, it limited the abrogation of fiduciary duties to those violations of such duties that do not represent “gross negligence or willful misconduct.” Op. ¶53. It was too early in the case to say whether the allegations made against the defendants constituted “willful misconduct.”

“Claim” For Receivership And Dissolution Of The Company Was Also Dismissed

Plaintiff had also sought the appointment of a receiver for the company or that the company be dissolved

Judge Robinson observed that “[i]t is well-settled under North Carolina law that the appointment of a receiver and the dissolution of a company are remedies, not distinct causes of action.” Op. ¶60.

This is the third time recently that the Business Court has dismissed a remedy improperly couched as a cause of action. It also did it in Brier Creek Owners Ass’n v. Brier Creek Country Club Owners Ass’n, 2026 NCBC 42 (Houston, J.)(claim for injunctive relief dismissed because it was a remedy, not an independent cause of action) and in Jekson USA, Inc. v. White, 2026 NCBC 25 (Davis, J.)(a claim for punitive damages was dismissed because it is not a stand-alone claim.”)

Don’t make those kinds of “claims.”

As I picked up the hefty Opinion in Xchange Tech. Rentals LLC v. UK Atlanta Holdings, LLC, 2026 NCBC 36 (Davis, J.)(59 pages and 158 paragraphs!) I thought once again about instituting a policy that I will not write about Opinions that are more than 50 pages long. But then, I decided that would be too restrictive as there is often a lot that absolutely needs to be said in an Opinion. So I thought about a policy about not writing about Opinions longer than 50 pages that did not need to be longer than 50 pages. After I finish laboring through this hefty Opinion, I will let you know what I think.

The principal plaintiff in Xchange Technology is Jeff McFarlane, the sole owner of Xchange. MacFarlane had entered into a services agreement whereby he became the chief executive officer of a nonparty called the Damovo Group. Damovo is a holding company which is the sole owner of the Defendants UK Atlanta Holdings and Lares Holdings, LLC.

Plaintiff MacFarlane, in connection with his employment, entered into two separate Incentive Unit Award Agreements”—one with Defendant Lares and the other with Defendant UK Atlanta. Op. ¶16. McFarlane received 600 "incentive units” in each of those companies. These were "intended to constitute ‘profits interests.’” Id.

Friction subsequently arose between McFarlane and the Damovo Group. Under McFarlane's management, the Polish office of Damovo was subjected to government investigation for criminal fraud. The managing director and the operating director had been detained and questioned by Polish authorities for allegedly falsifying invoices for more than 200,000 euros as part of a tax evasion scheme. Op. ¶33.

In April 2024, Damovo’s Board notified McFarlane that they had decided to terminate his employment as Damovo’s CEO. In that notification, the Board informed McFarlane that he had materially breached the agreement by which he was employed.

Two weeks later, MacFarlane sued the Defendants for failing to pay him the incentive units due under the Incentive Unit Agreements with them. He accompanied that breach of contract claim with an alternative claim for unjust enrichment. The defendants fired back with their own counterclaims — for breaches of the Services Agreement, breach of fiduciary duty, fraud, embezzlement, and conversion.

Unjust Enrichment Claim Dismissed with Prejudice

Judge Davis sliced through the unjust enrichment claim pretty easily. He noted that “since an action for unjust enrichment is quasi-contractual in nature, it may not be brought in the face of an express contract.” Op. ¶62. He went on to say that “[h]ere it is undisputed that enforceable written contracts govern the legal relationships between the parties in this case. As such, McFarlane cannot seek recovery under a theory of implied-in-law contract or quasi-contract.” Op. ¶63.

He granted the Defendant's Motion for Summary Judgment with prejudice on MacFarlane's alternative unjust enrichment claim.

McFarlane’s Breach of Contract Claim for Termination Payments Looked Much More Solid

The Services Agreement contained unqualified language regarding McFarlane's right to termination payments. It began with the language “In the event [McFarlane’s] contract is terminated by the Company, [McFarlane] will be entitled to:” a wealth of compensation benefits. units. Op. ¶70. That agreement doesn’t mention the incentive units. They are covered under the separate Incentive Unit Agreements.

McFarlane contended that, based on that language, “the only prerequisite to his receipt of the Termination Payments was that his employment be terminated by Damovo (which it clearly was).” Op. ¶71.

Whoa, not so fast, said Judge Davis. He said that this “argument fails to take into account the fact that Defendants have pled the affirmative defense of prior material breach in which they allege that McFarlane’s prior breaches of the [Services Agreement] have excused their performance obligations. As a result, Defendants contend, they were not required to comply with the ‘Termination Payments’ provision".” Op. ¶72.

The black letter law in this situation is that:

It is well settled that where one party breaches a contract, the other party is relieved from the obligation to perform.” Ball v. Maynard, 184 N.C. App. 99, 108 (2007) (cleaned up). However, “[a] breach discharges further performance only if the breach was material.” Chesson v. Rives, 2016 NCBC LEXIS 92, at *34 (N.C. Super. Ct. Nov. 30, 2016) (cleaned up).

Op. ¶73.

Whether McFarlane's alleged breaches of his contractual obligations were "material" enough to excuse the defendants from their obligations upon termination was a question of fact which could not be resolved at the summary judgment stage. Op. ¶73.

The burden of proof on the "prior material breach defense” rested upon the party claiming if performance obligations were excused (i.e. the Defendants). Op. ¶74.

Many of these alleged "material breaches" were nebulous (like, for example to “carry out the management of the Damovo group of companies, “provide day-to-day leadership to the senior management team”, "promote, develop and extend the interests of the Company”, and "drive profitable growth for the Company through the development and execution of a strategic plan. Op. ¶77.

Judge Davis spent much of the remainder of his Opinion (¶¶79-112) discussing whether the Defendants had satisfied their burden of establishing that there was no genuine issue of material fact as to these alleged breaches. Those paragraphs contain extensive quotations from the depositions taken in the case.

What About the Incentive Units?

McFarlane's right to the incentive units was governed by the separate terms of the Unit Awards Agreements and the accompanying Operating Agreements of the defendant LLCs.

Those agreements specify that McFarlane would forfeit his rights to the unit awards if he were terminated “for cause.”

The answer to whether McFarlane's termination was “for cause” circled back to the same questions of fact which Judge Davis had concluded precluded summary judgment for the Defendants on the other contract issues. Summary judgment on the claims concerning the unit awards was denied for both parties.

A Little Bit Left

There were a couple of minor claims dealt with by Judge Davis at the end of the Opinion.

One concerned the Plaintiff's alleged breach of his Confidentiality Agreement. McFarlane had agreed, upon the termination of his employment, to return all “Confidential Information” to the Defendants. McFarlane had attached a document marked "confidential” to one of his court filings. Judge Davis noted that Defendants "have not presented any evidence suggesting that McFarlane has actually used — or otherwise disclosed — any of their confidential information.” Op. ¶136. He determined that McFarlane had in fact violated the confidentiality agreement by not returning some of the information deemed to be confidential. He left open for trial the question of damages relating to this claim.

Also worthy of mention was Judge Davis's disposition of the Defendants’ claim that McFarlane had converted two of the company laptops. He determined there was a genuine issue of material fact as to the identity of the lawful owner of the laptops. This is the second time in the last month that Judge Davis has had to deal with the monumental issue of who was the legal owner of a laptop (Yawn).

Turning Back to my Original Question

turning back to my question at the outset of the discussion of this case, is this an Opinion that is over 50 pages long didn't have to be that long? Well, yes, it would've gotten caught in my as yet unimplemented filter. It didn't need to be 59 pages long. But am I glad that I wrote about it? Yes.

The Opinion in Implus Footcare, LLC v. Vore, 2026 NCBC 34 (Davis, J.) Is a dispute between parties that are both engaged in the design and distribution of footwear accessories and should care products. Op. ¶ ¶4,7.

One of the Defendants (Blue San) based its counterclaim for unfair and deceptive trade practices claim on the Plaintiff's initiation of the lawsuit. Blue San claimed that the complaint had been filed as a pretextual "sham which had used to intimidate Defendant Vore (a founder of blue San) and Blue San’s prospective customers. Op. ¶20.

Plaintiff claimed that this counterclaim was barred by the Noerr-Pennington doctrine. What is that, you're wondering? Here you go:

The Noerr-Pennington doctrine provides that “a party who seeks redress by filing a lawsuit is immune from claims that are based solely on the pursuit of that lawsuit.” Velocity Sols., Inc. v. BSG Fin., LLC, 2016 NCBC LEXIS 19, at 15 (N.C. Super. Ct. Feb. 22, 2016) (emphasis added) (cleaned up); see also Found. Bldg. Materials, LLC v. Conking & Calabrese, Co., 2024 NCBC LEXIS 40, at 15–17 (N.C. Super. Ct. Mar. 4, 2024) (holding that the Noerr-Pennington doctrine is applicable to claims for UDTP).

Op. ¶ ¶32 & n.3.

Plaintiff also argued that to the extent that communications made by counsel in connection with the complaint were a subject of the unfair and deceptive trade practices claim, that they were barred by the "learned profession" exemption. That exemption “immunizes a defendant from UDTP liability where: (1) “the person or entity performing the alleged act [is] a member of a learned profession[;]” and (2) “the conduct in question [involves] rendering of professional services.” Op. ¶32 & n.4.

This case was before the Court on a Motion for Partial Judgment on the Pleadings (per NCRCP 12(c). As Judge Davis so often does (much to my disappointment) he ruled that he "would greatly benefit from a more fully developed factual record" before rendering a decision. I will follow-up when the record is more “fully developed.”

The Court’s Opinion in PJC Mgmt. Grp., LLC v. MAACO Franchisor SPV LLC, 2026 NCBC 37 (Conrad, J.) is a testament to the principle that North Carolina is serious about notice pleading.

The Plaintiffs are an LLC made up of franchisees of MAACO, a franchisor of vehicle painting and autobody repair businesses. The franchisees and the franchisor are in a spat over the weekly marketing fees that the franchisees pay to MAACO.

The Plaintiff is dissatisfied with MAACO’s handling of their payment of the weekly marketing fees. They allege that:

MAACO . . . scaled back its television advertising, shuttered its in-house ad agency in favor of using independent agencies, and raised administrative fees while cutting marketing expenditures.

Op. ¶7. Plaintiff said they had experienced "a sharp downturn in customer business.” Id.

Plaintiffs demanded an accounting from MAACO, but MAACO “balked” Op. ¶7. The Plaintiff-franchisees sued for breach of contract. MAACO moved to dismiss contending that the allegations of the Complaint, even if true, did not establish a breach. As MAACO construed the Complaint, all that it alleged was that:

it made an unpopular decision to switch from an in-house advertising agency to an independent agency, which increased administration costs and reduced the amount spent directly on ads placed on television, radio, and other media. MAACO insists that this decision was a legitimate exercise of its broad discretion to administer advertising and marketing programs under the franchise agreements.

Op. ¶16.

Judge Conrad said that this was too narrow a construction of the Complaint’s allegations. He said that:

Plaintiffs’ beef with MAACO is not simply that it made bad decisions about how to administer its marketing programs and allocate funds among different types of media. Rather, Plaintiffs allege that MAACO has misappropriated a portion of the collected fees, putting the money toward impermissible uses that have nothing at all to do with advertising or marketing more broadly. As the complaint puts it, “MAACO has siphoned funds from the advertising funds/marketing fees paid by Plaintiffs for the improper purpose of cutting . . . administrative and overhead costs or to pay for other expenses unrelated to and not benefiting the MAACO franchise system.” (Compl. ¶ 42.)

Op. ¶17.

MAACO argued that this was "a conclusory, on reasonable inference, alleged only upon information and belief" and that the Complaint should still be dismissed. Here is where the concept of notice pleading entered the picture. Judge Conrad held that “North Carolina remains a notice pleading jurisdiction, and our Supreme Court has long held that a plaintiff “may allege facts based on actual knowledge, or upon information and belief.” .” Op. ¶18 (quoting Myrtle Apartments, Inc. v. Lumbermen’s Mut. Casualty Co., 258 N.C. 49, 51 (1962)).

“Remains a notice pleading jurisdiction?” Wait a minute. Doesn't every single state have its own Rules of Civil Procedure following Rule 8 of the Federal Rules requiring only “a short and plain statement of the claim showing that the pleader is entitled to relief.”

The answer to that question is no. Many states require “fact pleading” (e.g., California, Florida, Illinois, Louisiana, New Jersey, New York, Pennsylvania, Texas, and Virginia)./ Fact pleading does not allow reliance upon broad, vague, or conclusory statements The Plaintiff must spell out exactly what happened, when, where, and how.

If you think that Judge Conrad is so loose on notice pleading that he is apt to let anything slide, you are wrong. He said that Plaintiffs’ claims against MAACO’s co-Defendants were insufficient even under a simple notice-pleading standard. Those co-Defendants were guarantors of MAACO’s contractual duties and obligations. Plaintiffs alleged simply that those co-Defendants were jointly liable for MAACO’s breaches.

Judge Conrad derided those allegations as “threadbare” and “vague” and “conclusory.” Op. ¶21. He said that Plaintiff's theory appeared to be that the guarantees would apply to a monetary judgment if one was entered against MAACO. That theory he said, was "not ripe. There is no judgment yet; the pleadings haven't even closed.” Op. ¶21. He dismissed those claims without prejudice.